What is ATOL protection?

Every year, package tour companies go bust, leaving customers without a holiday to look forward to, or stranded overseas. And this year will probably be no different.

But while money doesn't make up for a ruined vacation, four letters – ATOL - on a travel company's website or literature could mean a free rescue flight home or the cash to buy another holiday if you had not set out before the firm failed.

What is ATOL protection?

ATOL stands for Air Travel Organisers' Licensing. It's part of the Civil Aviation Authority and is backed by the government. It moves into action when a member company goes bust. Last year, it repatriated 43,637 holidaymakers abroad under the scheme while a further 132,820 received full refunds when their ATOL tour firm collapsed before their holiday date.

Firms can only get an ATOL number if they can show sufficient financial strength at the time of applying. It's funded by a £2.50 levy on each
holiday sold.

What does ATOL cover?

ATOL only protects certain holidays. Package holidays where you buy travel and accommodation at the same time are covered. Air travel from agents with ATOL permits which sell “flight only” tickets is also covered – look for the ATOL number on the firm's adverts or website.

Package holiday, however, have declined in popularity. More of us now go for “DIY” holidays where we put our own airline travel and hotel packages together, usually from different websites or suppliers. This offers greater freedom as well as often saving money. These are excluded from
ATOL compensation.

You don't benefit from ATOL protection if you simply buy an air ticket from the airline itself. And watch out for a number of, generally small, firms that act as “agent on behalf of the customer”. These don't technically 'sell' the flight element of a holiday, instead they buy it on your behalf. They sometimes use the holidaymaker's own credit card for this. This activity does not require ATOL even if both a flight and accommodation are bought at the same time.

Firms can only get an ATOL number if they can show sufficient financial strength at the time of applying.

Next year should see rule changes. ATOL protection is due to extend to include 'flight plus' holidays - trips including a flight where the various elements are purchased within a specified short period. This will still not cover a number of DIY holidays involving a flight and direct purchase of accommodation - perhaps in the country where the holiday will take place. And there will be crackdown on “agent for the customer” firms.

ATOL is limited to air travel. So what of the increasingly popular cruises or railway holidays? Look for another set of initials – ABTA, the Association of British Travel Agents. ABTA members are bonded and have a compensation scheme. So if you book the elements of a holiday including initial travel, hotels and other flights or railway journeys through an ABTA member, you're protected against failure.

How does travel insurance help?

Some travel insurance policies offer “scheduled airline failure” cover which helps if the airline goes bust. You don't need this if your holiday is ATOL or ABTA protected but it can be worthwhile protection for individual travellers putting their own holidays together.

If your policy started or renewed before 01/01/2015
John Lewis Insurance is a trading name of John Lewis plc. Registered in England No. 00233462. Registered office: 171 Victoria Street, London, SW1E 5NN. John Lewis plc is an appointed representative of UKAIS Limited (No. 02613429). Registered in England and Wales at Prospect House, Gordon Banks Drive, Trentham Lakes North, Stoke on Trent ST4 4TW. Authorised and regulated by the Financial Conduct Authority (financial services register 307223).

If your policy started or renewed on or after 01/01/2015
John Lewis Insurance is a trading name of John Lewis plc. Registered in England No. 00233462. Registered office: 171 Victoria Street , London, SW1E 5NN. John Lewis plc is an appointed representative of Ageas Retail Limited. Registered office: Ageas House, Hampshire Corporate Park, Templars Way, Eastleigh, Hampshire, SO53 3YA. Registered in England and Wales 1324965. Ageas Retail Limited is authorised and regulated by the Financial Conduct Authority. FCA registered number: 312468. Ageas Retail Limited is a member of the DMA and a sister company of Ageas Insurance Limited.